Shore Financial Planning’s Ben Yearsley on The Budget

In this budget the chancellor didn’t announce anything of huge significance for personal financial planning.

The announcement with the widest impact is the increase in the Personal Allowance; from April 2019 to £12,500 (currently £11,850). The level at which higher rate tax is paid to start at £50,000 (currently £46,350). This was previously due to start in 2020, a help to have it a year early.

Interestingly there was no attack on pensions; no reduction in either the lifetime allowance or annual contribution limit. No capital gains tax changes, investment rates of CGT remain comparatively low at 10% and 20%. These are the key areas our industry watches out for. The following inflationary increases to allowances will apply from April 2019 e.g. Lifetime allowance goes up to £1,055,000, Junior ISA to £4,368, CGT to £12,000. Whilst ISA, Help to Buy ISA and LISA allowances remain unchanged at £20,000, £3,000 and £4,000.

In the early part of the budget, the main focus was on marginally increased growth assumptions from the OBR, although without an upgrade for 2018. Growth is expected to be between 1.4% and 1.6% per year until 2023. The annual budget deficit (when spending exceeds income, the short-term picture) is projected to fall to 0.8% by 2023/24. Rather than generate a surplus, the chancellor is relying on growth to reduce the total public debt (the long-term picture; the ‘mortgage’) to GDP (the value of economic activity; our ‘salary’ as a country if you will), which is projected to fall to 74.1% by 2023/24. The OBR does tend to revise their figures regularly, but it is encouraging that debt to GDP is expected to fall over the next five years, even though absolute debt will still rise.

There were lots of other items, for example £400m for schools this year, the new UK Digital Services tax to be introduced from 2020 targeted at businesses with global revenues of at least £500m (this one should raise about £400m on its own). In addition, there were various housing measures announced such as increasing the maximum to £500k at which no stamp duty is paid by first time buyers on shared ownership housing (aimed at the London market). The much-maligned Private Finance Initiative will be consigned to history with no new deals signed; all existing deals will stay in place which will bring a sigh of relief to some parts of the investment community (some large funds invest in these projects).

The detail will be analysed over the coming days but for now, as we were.